Are you struggling in debt and need to find a way out?
- No one means or plans to be in personal debt!
- It’s just one of those things that kind of creeps up on us most certainly after a change in personal circumstance.
By the time you’ve got that new car on the drive, the top of the range kitchen and the flash summer holiday, it’s no surprise that the UK’s average wage of £22k a year simply isn’t enough!
According to latest figures, the average amount of personal debt each person in the UK owes is approximately £15,000. This means that in many cases £15k would be seen as a walk in the park as debt levels of around £30k-£50k are not uncommon.
At the heart of the issue is the fact that it had become generally accepted that it was possible and indeed accepted to ‘live beyond your means’. The fact remains that even slipping into debt for a short period of time can soon spiral out of control with monthly payments creeping well in excess of monthly take home pay!
- Once you’ve reached this point the focus switches to managing monthly payments rather than reducing the underlying personal debt.
Let’s take Mike and Claire. A young couple with two children a £150k mortgage and combined household income of £35k. Mike and Claire typify what Nick Clegg refers to as ‘Alarm Clock Britain’. They take home £2000 a month but with mortgage, household bills and food shopping alone taking £1500 away, it’s not long before clothes for the kids, Pizza Friday and Bob the dog’s pet food account takes up the rest!
So they put the summer holiday on a credit card, spent a bit on the house, bought a new car and before they knew it had racked up £20k in personal unsecured debt.
Easily done, but the net effect is an endless cycle of earning just to make the monthly re-payments. The spare £500 a month soon becomes insufficient to cover the minimum payments on that £20k and poor old Bob is going a bit hungry!
The easiest and simplest way to reduce your debt is to spend less. This sounds obvious but is easier said than done. Unless you can suddenly find a lump sum to pay debts off, the only way you’re going to decrease the balance is by paying off more than you spend or by marginally increasing your income.
In Mike and Claire’s case reducing their spending is going to be pretty hard as there really isn’t a lot spare but maybe Free view TV instead of popular subscriber options such as Sky or Virgin and other cable TV, shopping around for better utility rates might help?
To increase income they could eBay some of that junk in the loft, see if some overtime is available or maybe try and earn some extra through a small part time job.
- Alongside these approaches it is also useful to shop around to see if there are lower interest deals, or 0% interest offers that they can benefit from.
- Credit card companies are fighting for our business, and if you find the deal that is right for you then even 6 months without interest can make a big difference in helping you turn your finances round.
- It may help to think of this as a part-time job.
As Director of Family Finances you should always be on the lookout for special offers, new deals and trying to coordinate them so you’re always best placed to reduce your family’s debt or increase savings.
By regularly comparing all your credit cards’ interest rates and transferring balances away from the cards with the higher rates can be a great option. Second, think about simply calling the credit card company who has the higher rate. As credit card companies are under pressure to retain customers you may find that you can get a better deal simply by asking for one, particularly if you can quote a competitor’s deal when you call!
Think of it like the “lowest price guarantee” that most stores offer. Setting up an automatic payment through your bank is another way of reducing your credit card debt more effectively.
- Maybe repaying debt instead of buying more shoes is the answer after all?
If none of these techniques are doing the job and you are fed up of being in debt then it may be time to get in touch with Lewis Alexander Financial Management. One of our personal debt specialists may be able to help you reduce your personal debt by understanding your individual circumstances.
- Call us FREE today from a land line using 0800 018 6868 and you may be able to start your journey to clear debt that is holding you back.
